I don’t even want to talk about it, really. It’s too frightening.
You see, there is this. . . this thing in the corner of my room. It’s perched on my desk, its spine arched toward me, but I can imagine its gaping mouth—grinning, toothless, slightly open.
I’m not crazy; I haven’t reverted to childhood or had one too many margaritas. No, this thing is really there. It’s green and menacing and scary and full of numbers.
Yes, numbers. I’m terrified of my checkbook, and of the accordion-folder (curiously shaped like Audrey II in Little Shop of Horrors) that I recently bought to file receipts and paycheck stubs.
How, then, am I qualified to give advice about how to manage your money? Simple: Because I’m terrified of it. Psychologically, people with neurotic tendencies and uncertainties about a particular aspect of life – in this case, money – are more likely to be careful about what they do concerning it.
Failing that – because my example in this area as in many others is far from perfect – let’s just say that “it were easier to teach twenty what were good to do than to be one of the twenty to follow mine own teaching.” As with most of my advice, in this matter I learned what is good to do primarily by not doing it. Alongside you, then, I am still trying to form these basic habits:
Write down every purchase you make at the time you make it. This is the simplest thing to do and therefore the hardest to actually stick with. As with many other small daily actions, though, it has an annoying, smarmy way of making the big problems easier to work out. Speaking of big problems:
Balance your checkbook every time you get a statement. Yes, it’s a pain in the posterior. If you do it, though, you’re less likely to overdraw or to have other problems with your bank. Knowing exactly how much money you have is one of the first steps to managing it well.
Keep track of how much you’re earning and spending. If you do the two things listed above, you’re pretty much already here. Feel good? Don’t get too comfortable:
With this knowledge in mind, set a budget for how much you can spend each month. We love to hate limits; we hate to recognize that, well-applied, they’re a recipe for freedom. That’s why I use the word “budget,” which implies strictness, rather than my original “goal,” something you can reach for but that is relatively consequence-free if you miss. I’ll leave the lecture to someone else (probably your parents), but messing up your budget is not consequence-free. Sticking to it is liberating, if only in a very small way. It won’t change your life, but it will ward off a lot of unnecessary stress and trouble.
The keys to budgeting?
- Don’t spend money you don’t have.
- Try not to spend money before you get it (we’ll deal with credit cards below).
- Cover the things you need (rent, food, gas, car payments) before you think about the things you want (parties, music, DVDs, tons of stylish clothes), and learn to tell the difference.
Save as much as you can. Smart financial-type people recommend that you set aside as much as six months’ worth of wages for security if you lose your job or for some other reason can’t work. This is less important if, like many college students, you are not completely financially independent (i.e. parents or guardians will cover your you-know-what if things go wrong). Still, it’s a good idea to have some money set aside for those things you do have to cover by yourself, in case of emergencies. Even if you never have to use it, just don’t touch it and voila! you have a nice little fund with which to start your independent life after college.
Bring your brain on shopping trips. Don’t pay more for things than you have to. Look for clothes on sale; compare prices at the grocery store; buy school supplies at times when you can find special deals. This is really easy if you apply your common sense, but so many people don’t do it because it takes a little effort. You’re smarter than that, though. (Side note: Don’t buy things just because they’re on sale and therefore a “good deal” – something which is often my downfall.)
Don’t make (too many) impulse purchases. This is as much as to say “do not imitate the government; make sure you have money before you spend it.” A budget should help with this, particularly if you can figure in a little extra for things you just want each month, but by a long shot budgeting won’t clear away the temptation of a new PlayStation attachment or a fabulous(ly expensive) pair of jeans. For things like this, it’s better to wait and save money in other areas until you’ve put aside enough to get them guilt-free.
When it comes to gambling, proceed with caution. Too many college students, especially now that Texas Hold ‘Em is so fashionable, fall down in this area. A friend of mine who loves to play poker has what I think is a good plan: He budgets for it as for an impulse purchase, setting aside a certain small amount of money to begin with. He hopes to increase it as he plays, but he doesn’t add any to it from his other finances. If he loses it, he’s done playing until he can budget for it again. This detaches the game from the rest of his financial life, so he can play with a free mind. (But now we’re getting into poker tips – an area where you should definitely consult him, not me.)
Don’t overdo it with credit cards. Have as few as you can live with (I have exactly one). If you have any, be relentlessly punctual with them. Pay your bills on time, every time; otherwise, you’ll be befuddled with interest charges, debt, and all sorts of mess and stress you simply do not need. It’s important to establish good credit in your name, but if you can’t do that, it may be better not to establish any credit just yet.
Clearly, if you’re trying to learn how to invest and become a millionaire by your 30s, you have come to the wrong place. (Step one: Don’t become an English major. Whoops – I’ve already goofed that one, too.) If you just want to make the numbers add up right each month, though, then I hope these tips will help. We’ll see, as soon as I figure out how to use this calculator.
This article originally appeared on Making It Count.
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